Which one of the following statements is TRUE?
A) In the short run, the level of output is determined by demand.
B) In the long run, the level of output is determined by demand.
C) In the long run, the aggregate supply curve is horizontal.
D) Where aggregate demand and aggregate supply intersect is always the full-employment level of output.

Question

Quizplus · Accepted Answer

In the short run, the level of output is indeed determined by demand, according to Keynesian economics. This is because, in the short run, prices and wages are sticky, and firms adjust their output based on the aggregate demand in the economy.

Which One of the Following Statements Is TRUE